Oil may be out of Range

THE leafy suburb of Heidelberg is a world away from the dusty streets of Garowe in Puntland, but a Heidelberg resident has flown home to the Somali state to become the latest thorn in the side of oil explorer Range Resources.

The newly elected President of Puntland is Abdirahman Mohamed Farole, 63, a PhD candidate at La Trobe University's Bundoora campus who has lived in Melbourne for much of the past 10 years.

News of Dr Farole's election was greeted with little cheer from the board at Range. Dr Farole has been a vocal critic of the oil and mineral rights deal that the tiny Australian company struck with Puntland's government in 2005.

Within hours of rumours of Dr Farole's win reaching Perth, Range was in a trading halt and pondering the implications of the news.

"The company requests a trading halt pending the release of an announcement relating to election results in Puntland, Somalia," wrote executive director and company secretary Peter Landau.

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That election announcement has since arrived, Dr Farole has been sworn in as president, and Range has remained silent.

No official line is expected from the company until Tuesday, but there is little doubt that Dr Farole's election has thrown a spanner in the works for both Range Resources and Mr Landau's ambitious dream to bring Somali oil to the market.

It will also hinder the company's recently announced $3 million equity raising. The rights issue was apparently to help fund further exploration in the region.

Dr Farole is regarded as one of the founding fathers of Puntland — a self-declared, semi-autonomous state in the north of Somalia and home to the world's most profitable pirate racket.

The problem is that it seems only Range Resources, joint-venture partner Africa Oil, and the self-appointed government of Puntland actually recognise the region's sovereignty.

Certainly the United Nations doesn't. Nor does the Transitional Federal Government of Somalia. Or the Commonwealth of Australia.

Even the new president — who arrived in Garowe knowing he had the support of Puntland's clan leaders and would win an "election" in which 66 clan elders are the only people allowed to vote — realises that few actually recognise Puntland as a democratic state.

Much of his victory speech was dedicated to reaffirming the relationship with Somalia's transitional government, and he vowed that "we (Puntland) will never allow anyone to violate the federal system".

Sadly for Range, its mineral rights deal with Puntland seemingly violates that federal system. Indeed, in 2005 the transitional government's then prime minister, Ali Mohammed Gedi, wrote to the ASX to state that Puntland had no legal right to sell any mineral or hydrocarbon rights for the region to an Australian company. But Range gambled that Mohamud Musse Hersi would win a second four-year term as president, and Mr Landau admitted as much this week. "From our perspective, Hersi getting back in is very important," he said on Tuesday.

Instead, it must now deal with a man who quit Mr Hersi's cabinet and then returned to Australia in late 2005 after opposing the deal struck with Range.

Dr Farole had wanted to conduct an international tender for exploration rights in conjunction with Somalia's transitional government, rather than award them to Range, which was promising cash up front.

When contacted, Mr Landau had a brief statement. "Range Resources acknowledges the recent elections in Puntland and congratulates the new president on his election," he said.

"The company looks forward to commencing a dialogue with the new president and his cabinet regarding the development of oil and gas assets in the region."

Which means it is all back to square one for Range and its shareholders.